MATERA v. NATIVE EYEWEAR

The opinion of the court was delivered by: ARTHUR SPATT, District Judge

MEMORANDUM OF DECISION AND ORDER

This case, filed on July 6, 2004, based on diversity
jurisdiction, involves allegations by the plaintiff Pasquale
Matera ("Matera" or the "Plaintiff") that the defendant Native
Eyewear, Inc. ("Native Eyewear" or the "Defendant") failed to
honor its obligations under a written consulting agreement.

Presently before the Court is a motion by the Defendant
pursuant to Federal Rule of Civil Procedure ("Fed.R.Civ.P.")
12(b)(3) to dismiss the complaint in its entirety for improper
venue, or in the alternative, to transfer venue to the United
States District Court for the Eastern District of Pennsylvania
pursuant to 28 U.S.C. § 1404(a) or § 1406(a).

I. BACKGROUND

For purposes of a motion to dismiss for improper venue pursuant
to Rule 12(b)(3), "the Court must accept the facts alleged in the
complaint and construe all reasonable inferences in the
plaintiff's favor." Fisher v. Hopkins, No. 02 Civ. 7077, 2003
WL 102845, at * 2 (S.D.N.Y. Jan. 9, 2003) (citations omitted).

The Plaintiff, a designer in the field of sunglass products,
was at all times relevant to this action, a resident of the
County of Nassau, State of New York. The Defendant is a
Pennsylvania corporation with its principal place of business in
Huntington Valley, Pennsylvania. Native Eyewear is engaged in the
business of manufacturing sunglass products and is the successor
by merger to J.W. Envisions, Inc., which did business under the
name "Ultimate Vision."

On August 5, 1997, the Plaintiff and Ultimate Vision entered
into a written consulting agreement (the "Agreement") pursuant to
which the Plaintiff agreed to supply the Defendant with certain
design and marketing services, including designs, packaging
ideas, trade names, trademarks, logos and intellectual property
assets concerning sunglass products (the "Assets"). In return,
the Defendant agreed to pay the Plaintiff specified royalties on
the sale of sunglass products incorporating the Plaintiff's
designs. The Agreement also provided that Ultimate Vision had to
pay certain royalties to Matera based upon the sale of all Matera
designs. In addition, Ultimate Vision agreed to supply a
statement of sales made and a description of the calculation used
in determining the royalty amount due. Significant to the
resolution of this motion, Article 9 of the Agreement contained a
provision addressing the "Construction" of the Agreement. This
section states:

The construction and performance of this Agreement
shall be governed by the law of the Commonwealth of
Pennsylvania, USA. In the event of litigation, the
first forum for deciding issues of venue and
jurisdiction shall be the U.S. District Court for the
Eastern District of Pennsylvania.

Agreement Art. 9.

The Plaintiff alleges that Native Eyewear breached the
Agreement by failing to pay to the Plaintiff the full amount of
the royalties due, and, also failing to furnish royalty
statements for the calendar years 2001, 2002, 2003, and 2004 as
provided for in the Agreement. The Plaintiff also seeks
injunctive relief restraining the Defendant from, among other
things, the distribution and/or sale of any products
incorporating the Assets. In addition, the Plaintiff claims that
as a shareholder of the Defendant's corporation, he is entitled
to a proportionate distribution of the Defendant's taxable
income. Finally, the complaint contains a cause of action for
conversion.

Less than one month after the Plaintiff filed the instant
complaint, on July 26, 2004, the Defendant filed an action in the
Eastern District of Pennsylvania alleging that Matera breached
various provisions of the Agreement and also unlawfully disclosed
certain confidential trade secrets.

In support of its motion, the Defendant claims that this action
should be dismissed for improper venue because the Plaintiff has
not established that venue is proper under 28 U.S.C. § 1391
(a)(1) and (2). In the alternative, should the Court find that
venue is proper in the Eastern District of New York, the
Defendant argues that Article 9 of the Agreement mandates that
venue be transferred to the Eastern District of Pennsylvania.

Despite the abundance of case law setting forth the
requirements to succeed on a motion to transfer venue the
Defendant failed to submit any affidavit in support of their
motion. See Modern Computer Corp. v. Ma, 862 F. Supp 938, 948
(E.D.N.Y. 1994) ("The movant must support the application with an
affidavit containing detailed factual statements relevant to why
the transferee forum is more convenient, including potential
principal witnesses expected to be called and a general statement
of the substance of their testimony."); see also Pall Corp. v.
PTI Technologies, Inc., 992 F. Supp. 196, 198 (E.D.N.Y. 1998).

Attached to its reply brief, the Defendant included affidavits
setting forth, for the first time, additional facts and arguments
supporting its motion to transfer venue. However, these
affidavits and arguments will not be considered by the Court. Not
only did the Court deny the Plaintiff the opportunity to submit a
sur-reply to respond to the additional factual contentions, but
arguments cannot be made for the first time in reply papers. See
Knipe v. Skinner, et al., 999 F.2d 708, 711 (2d Cir. 1993)
("Arguments may not be made for the first time in a reply
brief."). In addition, the Court notes that the Defendant's Reply
Brief violated the Courts Individual Rules and Motion Practices
as it contained in excess of 20 pages and had several footnotes.
See Indiv. Motion Practices IV(B)(I) ("reply memoranda are
limited to 10 pages . . . [and] shall not contain footnotes").

II. DISCUSSION

A. As to the Motion to Dismiss for Improper Venue

Under Rule 12(b)(3) of the Federal Rules of Civil Procedure, a
district court may dismiss an action based on improper venue.
Upon such a motion, a court has the authority to dismiss an
action pursuant to 28 U.S.C. § 1406(a), which provides in
pertinent part that

The district court of a district in which is filed a
case laying venue in the wrong division or district
shall dismiss, or if it be in the interest of
justice, transfer such case to any district or
division in which it could have been brought.

Here, the complaint asserts that the court has diversity
jurisdiction over this action and that venue is premised upon
28 U.S.C. § 1391(a)(1) and (2). These subsections state:

(a) A civil action wherein jurisdiction is founded
only on diversity of citizenship may, except as
otherwise provided by law, be brought only in,

(1) a judicial district where any defendant resides,
if all defendants reside in the same State,

[or]

(2) a judicial district in which a substantial part
of the events or omissions giving rise to the claim
occurred, or a substantial part of property that is
the subject of the action is situated. . . .

It is important to note that "[f]or purposes of venue under
this chapter, a defendant that is a corporation shall be deemed
to reside in any judicial district in which it is subject to
personal jurisdiction at the time the action is commenced."
28 U.S.C. § 1391(c).

Therefore, while the Defendant is a Pennsylvania corporation
with its principal place of business in the Eastern District of
Pennsylvania it shall be deemed to reside in any judicial
district in which it is subject to personal jurisdiction at the
time the action is commenced. Id.

A court exercises personal jurisdiction over a party in
accordance with the law of the forum state, subject to the
requirements of constitutional due process. Whitaker v. Am.
Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001). Where the
parties have not engaged in extensive discovery or an evidentiary
hearing on the matter of jurisdiction, the plaintiff need only
make a prima facie showing that personal jurisdiction exists
over the defendant. Id.; Distefano v. Carozzi North Am.,
Inc., 286 F.3d 81, 84 (2d Cir. 2001). At this early stage, the
Court must construe all pleadings and affidavits in the light
most favorable to the plaintiff and any doubt must be resolved in
the plaintiff's favor. Hoffritz for Cutlery, Inc. v. Amajac,
Ltd., 763 F.2d 55, 57 (2d Cir. 1985) (citations omitted). To
that end, to determine whether Matera has made a prima facie
showing of personal jurisdiction over Native Eyewear, the Court
must look to New York's personal jurisdiction statutes, CPLR §
301 ("Section 301") and CPLR § 302 ("Section 302").

The Court finds that the complaint does not allege facts
sufficient to show that the Court has personal jurisdiction over
the Defendant pursuant to Section 301. Personal jurisdiction will
be established under Section 301 when the defendant is "engaged
in such a continuous and systemic course of doing business here
as to warrant a finding of its presence in this jurisdiction."
McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643,
419 N.E.2d 321 (N.Y. 1981) (internal quotations and citations
omitted). With respect to Section 301, the Plaintiff contends
that "[the] Defendant . . . is a multi-million dollar corporation
. . . [that] regularly does business in New York and throughout
the country." Plfs. Decl. in Opp. ¶ 9. In the Court's view, this
bare assertion, without more, is not enough to establish that the
Defendant was "engaged in such a continuous and systemic course
of doing business" in New York to bring it within the
jurisdiction of the New York Courts. McGowan, 52 N.Y.2d at 272.
However, this finding does not end the inquiry as the Court must
also determine whether there is personal jurisdiction over the
Defendant pursuant to Section 302, New York's long arm
jurisdiction statute.

Section 302 states:

(a) Acts which are the basis of jurisdiction. As to a
cause of action arising from any of the acts
enumerated in this section, a court may exercise
personal jurisdiction over any non-domiciliary . . .
who in person or through an agent:

1. transacts any business within the state . . .

Personal jurisdiction will exist under Section 302(a)(1) if (i)
the defendant has transacted business within the state; and (ii)
the claim arises out of that activity. See Bank Brussels v.
Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 787 (2d
Cir. 1999); see also Creative Socio-Medics, Corp. v. City of
Richmond, 219 F. Supp. 2d 300, 306 (E.D.N.Y. 2002). "Transacting
business requires only a minimal quantity of activity, provided
that it is of the right nature and quality and, in making a
determination, a court must analyze the totality of the
defendant's contact with the forum." Agency Rent A Car Sys.,
Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996)
(internal quotations and citations omitted). Factors that may be
considered in making this determination include:

(i) whether the defendant has an on-going contractual
relationship with a New York [entity]; (ii) whether
the contract was negotiated or executed in New York,
and whether, after executing a contract with a New
York business, the defendant has visited New York for
the purpose of meeting with parties to the contract
regarding the relationship; (iii) what the
choice-of-law clause is in any such contract, and
(iv) whether the contract requires franchisees to
send notices into the forum state or subjects them to
supervision by the corporation in the forum state.

Id. No one factor is dispositive as the determination must be
made on the totality of the circumstances. id. In addition, it
is well-settled that in order for the Court to obtain
jurisdiction under the "transaction of business" prong of Section
302(a)(1), the party need not be physically present in the state
at the time of the service, Bank Brussels, 171 F.3d at 787, and
"[A] single transaction would be sufficient to fulfill this
requirement." Id. (internal quotation marks and citation
omitted).

With regard to the first factor, it is clear that the Defendant
entered into the Agreement with the Plaintiff who at all times
relevant to this action has been a resident of this judicial
district. In addition, the Agreement contemplated an "ongoing
contractual relationship" between the parties, as the Agreement,
signed in 1997, provided for an initial period running from the
date of execution until December 31, 2000, renewable for
successive 2 year terms. Creative Socio-Medics,
219 F. Supp. 2d at 306 ("New York courts employ a prospective analysis in
determining whether an ongoing contractual relationship exists
between the parties."). To that end, the Complaint alleges that
the Defendant breached the Agreement for the calendar years 2001,
2002, 2003, and 2004. Thus, the first prong, namely whether the
defendant has an on-going contractual relationship with a New
York [entity] weighs in favor of finding personal jurisdiction.

As to the second factor, although it is unclear as to where the
Agreement was negotiated and entered into, the fact remains that
even assuming that the Defendant never physically entered New
York State to consummate the transactions in question, "proof of
one transaction in New York is sufficient to invoke jurisdiction,
even though defendant never enters New York." See Bluestone
Capital Partners v. MGR Funds, Ltd., 1999 WL 322658, at *4
(S.D.N.Y. 1999); see also Agency Rent A Car System, Inc.
98 F.3d at 30 (questioning "whether, in this age of e-mail and
teleconferencing, the absence of actual personal visits to the
forum is any longer of critical consequence."); Liberatore v.
Calvino, 293 A.D.2d 217, 742 N.Y.S.2d 291, 293 (1st Dep't
2002) (telephone calls and written communications may provide a
sufficient basis for personal jurisdiction under the long-arm
statute where they have been used by the defendant to actively
transact business in New York.).

Here, the Agreement provided that Matera should devote an
average of 15 hours per week on behalf of the Defendant and also
provide to the Defendant "marketing services and technical
support regarding the manufacturing, packaging, promotion, and
advertising of the Designs which are covered by this Agreement."
Agreement Art. 1(1.2). Although not specifically mentioned in the
Complaint or Affidavits, the Court will assume that given the
long-standing working relationship between the parties, even if
the Defendant never set foot within the confines of New York
state, the parties communicated via written communications,
e-mail, and telephone. Accordingly, this prong also weighs in
favor of establishing personal jurisdiction in New York.

Turning to the third factor, namely whether there is a choice
of law provision, the Court notes that Article 9 of the Agreement
provides that Pennsylvania law governs the "construction and
performance" of the Agreement. Because choice of law provisions
"have minimal jurisdictional implications," Alan Lupton Assocs.,
Inc. v. Northeast Plastics, Inc., 105 A.D.2d 3, 8,
482 N.Y.S.2d 647, 651 (4th Dep't 1984), the fact that the parties chose
Pennsylvania law to govern this action is not dispositive of the
issue of personal jurisdiction. See Creative Socio-Medics,
219 F. Supp. 2d at 307 ("the [P]laintiff may acquire personal
jurisdiction over [the defendant] even though the law of the
state of Virginia may have to be applied.").

Finally, with respect to the fourth factor, namely whether the
Defendant sends notices into the forum state or subjects the
Plaintiff to supervision in New York, the Agreement provided that
the Defendant is to submit royalty payments and statements to the
Plaintiff in Nassau County, New York and, also, that the
Plaintiff is to render his services in New York. See Bank
Brussels Lambert, 171 F.3d at 787. "Although as a general rule
the activity of a plaintiff within the forum pursuant to the
contract does not confer jurisdiction," Creative Socio-Medics,
Corp., 219 F. Supp. 2d at 308 (quotations and citations
omitted), here, the Plaintiff's services in New York were for the
direct benefit of the Defendant corporation. Id. (citing
United Paperworkers Int'l Union, 265 A.D.2d 274, 275,
697 N.Y.S.2d 37, 39 (1st Dep't 1999) (where "defendant requested
performance of plaintiff's New York activities for defendant's
benefit, and were intimately involved in the implementation of
plaintiff's campaign, plaintiff's work on defendant's behalf may
be attributed to defendant for jurisdictional purposes.").

After considering the totality of the circumstances, in the
Court's view, the Defendant has "transacted business" within the
meaning of Section 302(a)(1).

Once the plaintiff demonstrates that the defendant transacted
business in the state, he must also establish that his claims are
"sufficiently related to the business transacted that it would
not be unfair to deem it to arise out of the transacted business,
and to subject the defendants to suit in New York." Hoffritz for
Cutlery, 763 F.2d at 59. The plaintiff must show "some
articulable nexus between the business transacted and the cause
of action sued upon." Beacon Enters., Inc. v. Menzies,
715 F.2d 757, 764 (2d Cir. 1983) (internal quotation marks and citations
omitted). Here, it is undisputed that this action arises out of
the parties' business relationship and the Agreement.

Accordingly, the Court finds that the exercise of personal
jurisdiction under Section 302 comports with the Due Process
Clause of the United States Constitution. By virtue of its
business activities in New York  Native Eyewear "purposefully
avail[ed] [itself] of the privilege of conducting activities" so
that it should reasonably anticipate being haled into Court here.
See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475,
105 S. Ct. 2174, 2183 (1985); see also Int'l Shoe Co. v. Washington,
326 U.S. 310, 324, 66 S. Ct. 154, 162 (1945). Thus, the Plaintiff
has satisfied the elements of Section 302(a)(1) and the Defendant
is deemed to reside in the Eastern District of New York.
Windsor, S.A. v. Bicycle Corp. of America, 783 F. Supp. 781,
785 (S.D.N.Y. 1992).

The Court notes that venue is also proper in this district
pursuant to 28 Section 1391(a)(2). With regard to this
subsection, courts consider "where the contract was negotiated or
executed, where it was to be performed, and where the alleged
breach occurred." PI, Inc. v. Quality Prods., Inc.,
907 F. Supp. 752, 757 (S.D.N.Y. 1995). Although it is not clear where
the contract was negotiated and/or executed or where the alleged
breach occurred, the Plaintiff created the Assets, which are the
subject matter of the Agreement, within the confines of the
Eastern District of New York. Jordache Enterprises, Inc. v.
Brobeck, Phleger & Harrison, et al., No. 92 Civ. 9002, 1994 U.S.
Dist. LEXIS 2551, at * 15 (S.D.N.Y. April 3, 1996) ("[C]ourts
interpreting [this section] generally look to . . . where
services under the contract are to be performed." In the Court's
view, as stated above, the fact that the Plaintiff's services
were performed within the District is sufficient to establish
that venue is also proper under Section 1391(a)(2).

Because the Court concludes the Defendant is subject to
personal jurisdiction in this district, the Defendants motion to
dismiss pursuant to Rule 12(b)(3) is denied.

B. As to the Motion to Transfer Venue

In the alternative, the Defendant moves pursuant to
28 U.S.C. § 1404(a) or 28 U.S.C. § 1406(a) to transfer this action to the
Eastern District of Pennsylvania. Section 1404(a) provides for
the transfer of an action where both the original and requested
venue are proper. In contrast, Section 1406 authorizes the
transfer or dismissal of an action where the original venue is
improper. Because, as discussed above, the Court finds venue is
proper in the Eastern District of New York, the motion to
transfer venue must be analyzed pursuant to Section 1404(a). This
section provides:

For the convenience of parties and witness, in the
interest of justice, a district court may transfer
any civil action to any other district or division
where it may have been brought.

The moving party must support its motion with an affidavit
containing detailed factual statements explaining why the motion
should be granted including, among other things, the location of
events giving rise to the suit, convenience of the parties and
witnesses, transferee forum is more convenient. See Parfums v.
Rivera, 872 F. Supp. 1269, 1271 (S.D.N.Y. 1995). These
affidavits should include "the potential principal witnesses
expected to be called and a general statement of the substance of
their testimony." Modern Computer Corp. v. Ma, 862 F. Supp 938,
948 (E.D.N.Y. 1994); see also Orb Factory, Ltd.,
6 F. Supp. 2d at 209 ("Vague generalizations and failure to clearly specify the
key witnesses to be called, along with a statement concerning the
nature of their testimony, are an insufficient basis upon which
to grant a change of venue under § 1404(a)."); Balaban v.
Pettigrew Auction Co., Inc., et al., No. 96 Civ. 3177, 1997 WL
470373, at * 3 (E.D.N.Y. June 27, 1997). The Defendant failed to
submit any affidavits in support of its motion and as stated
above, the Court will not consider the affidavits submitted in
with its Reply brief.

C. As to the Alleged "Forum Selection Clause."

The Defendant contends that Article 9 of the Agreement
constitutes a forum selection clause mandating that this action
be transferred to the Eastern District of Pennsylvania. The Court
disagrees. As noted above, this Article states

The construction and performance of this Agreement
shall be governed by the law of the Commonwealth of
Pennsylvania, USA. In the event of litigation, the
first forum for deciding issues of venue and
jurisdiction shall be the U.S. District Court for the
Eastern District of Pennsylvania.

The Court finds that this paragraph does not constitute a forum
selection clause. A literal reading of this clause indicates that
it does not govern where this action is to be filed or where
venue and/or jurisdiction are proper. Compare with Cronin v.
Family Educ. Co., 105 F. Supp. 2d 136 (E.D.N.Y. 2002) (finding
the following to be a mandatory forum selection clause: "[i]n the
event of any dispute under this Agreement, the parties agree to
the exclusive jurisdiction of the courts located in the City
and State of New York."); GMAC Commercial Credit, LLC. v.
Dillard Dep't Stores, Inc., 198 F.R.D. 402, 404 (S.D.N.Y. 2001)
(finding the following to be an enforceable forum clause: "Any
controversy or claim arising out of or relating to these terms
and conditions shall be settled by suit brought in Pulaski
County, Arkansas. The law of Arkansas shall apply. Seller hereby
submits itself to the personal jurisdiction of the State of
Arkansas and agrees that the exclusive jurisdiction of any
controversy or claim shall be in the Courts of the State of
Arkansas, Pulaski County or the United States District Court for
the Eastern District of Arkansas.").

In fact, the Court is unsure of the purpose of this clause. At
most, it is an "issue selection clause" rather than a "forum
selection clause," stating that Pennsylvania is "the first forum
for deciding issues of venue and jurisdiction." (emphasis
added).

In the Court's view, the clause at issue in Article 9 of the
Agreement is ambiguous, confusing, unworkable, and does not
preclude the Plaintiff from filing this action in the Eastern
District of New York. Under the clause as written, the Plaintiff
is permitted to file this action in the Eastern District of New
York, or for that matter in any other District in which venue and
jurisdiction is proper, as there is nothing in the clause stating
otherwise. It would be an untenable stretch, for this Court to
infer from this language, that the parties intended that the case
be transferred to the Eastern District of Pennsylvania so that it
can be the "first forum" to decide these issues.

In addition, with respect to the Defendant's argument that this
clause requires the entire case to be heard in the Eastern
District of Pennsylvania, the Court notes that the narrow scope
of this clause is limits its application to issues of venue and
jurisdiction, not to the selection of a forum or to any other
claims arising from the terms of the Agreement.

Because this clause does not require the case to be filed or
heard in the Eastern District of Pennsylvania, the Plaintiff was
within his legal right to have brought this action in the Eastern
District of New York. The fact that the Plaintiff exercised this
right constitutes a vitiation of the so called "issue selection
clause," as there is no authority either in the law or by the
terms of the Agreement for the Court to transfer the issues of
venue and jurisdiction to the Eastern District of Pennsylvania.

Finally, the fact that the Defendant filed a subsequent, albeit
related, case in the Eastern District of Pennsylvania is of no
relevance to the Court's analysis of the instant motion. See
First City Nat'l Bank & Trust Co. v. Simmons, 878 F.2d 76, 79
(2d Cir. 1989) ("[w]here there are two competing lawsuits, the
first suit should have priority, absent the showing of balance of
convenience . . . or . . . special circumstances . . . giving
priority to the second.").

Accordingly, the Defendant's motion to transfer this action to
another district pursuant to 28 U.S.C. § 1404(a) is denied.

III. CONCLUSION

Based on the foregoing, it is hereby

ORDERED, that the motion by Native Eyewear to dismiss the
complaint for improper venue pursuant to Fed.R. Civ. P 12(b)(3)
DENIED; and it is further

ORDERED, that the motion to transfer venue to the United
States District Court for the Eastern District of Pennsylvania
pursuant to 28 U.S.C. § 1404(a) or § 1406(a) is DENIED; and it
is further

ORDERED, that the that the parties are directed to contact
United States Magistrate Judge Michael L. Orenstein forthwith to
schedule the completion of discovery.

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